The comparative financial statements of Marshall Inc. are as follows. The market price of Marshall common stock was $82.60 on December 31, 20Y2. Comparative Retained Earnings Statement For the years ended December 31, 20Y2 and 20Y1 20Y2 20Y1 Retained Earnings, Jan. 1 3,704,000 3,264,000 Net Income 600,000 550,000 Dividends: On Preferred Stock (10,000) (10,000) On Common Stock (100,000) (100,000) Increase in Retained Earnings 490,000 440,000 Retained Earnings, Dec. 31 4,194,000 3,704,000 Comparative Income Statement For the years ended December 31, 20Y2 and 20Y1 20Y2 20Y1 Sales 10,850,000 10,000,000 Cost of goods sold (6,000,000) (5,450,000) Gross Profit 4,850,000 4,550,000 Selling Expenses (2,170,000) (2,000,000) Administrative Expenses (1,627,500) (1,500,000) Total Operating Expenses (3,797,500) (3,500,000) Operating Income 1,052,500 1,050,000 Other Revenue and expense Other Revenue 99,500 20,000 Other Expense (interest) (132,000) (120,000) Income before income tax expense 1,020,000 950,000 Income Tax Expense (420,000) (400,000) Net Income 600,000 550,000 Comparative Balance Sheet December 31, 20Y2 and 20Y1 20Y2 20Y1 Assets Current Assets: Cash 1,050,000 950,000 Marketable Securities 301,000 420,000 Accounts Receivable (net) 585,000 500,000 Inventories 420,000 380,000 Prepaid Expenses 108,000 20,000 Total Current assets 2,464,000 2,270,000 Long-Term Investments 800,000 800,000 Property, Plant, and Equipment (net) 5,760,000 5,184,000 Total Assets 9,024,000 8,254,000 Liabilities Current Liabilities 880,000 800,000 Long-Term Liabilities: Mortgage note payable, 6% 200,000 0 Bonds payable, 4% 3,000,000 3,000,000 Total Long-term liabilities 3,200,000 3,000,000 Total Liabilities 4,080,000 3,800,000 Stockholders’ Equity Preferred 4% stock, $5 par 250,000 250,000 Common stock, $5 par 500,000 500,000 Retained earnings 4,194,000 3,704,000 Total stockholders’ equity 4,944,000 4,454,000 Total Liabilities and stockholders’ equity 9,024,000 8,254,000 Instructions Determine the following measures for 20Y2. Round to one decimal place, including percentages, except for per-share amounts, which should be rounded to the nearest cent. Working capital Current ratio Quick ratio Accounts receivable turnover Number of days’ sales in receivables Inventory turnover Number of days’ sales in inventory Ratio of fixed assets to long-term liabilities Ratio of liabilities to stockholders’ equity Times interest earned Asset turnover Return on total assets Return on stockholders’ equity Return on common stockholders’ equity Earnings per share on common stock Price-earnings ratio Dividends per share of common stock Dividend yield
Chapter 14 Homework
The comparative financial statements of Marshall Inc. are as follows. The market price of Marshall common stock was $82.60 on December 31, 20Y2.
Comparative
For the years ended December 31, 20Y2 and 20Y1
|
|
20Y2 |
20Y1 |
|
Retained Earnings, Jan. 1 |
3,704,000 |
3,264,000 |
|
Net Income |
600,000 |
550,000 |
|
Dividends: |
|
|
|
On |
(10,000) |
(10,000) |
|
On Common Stock |
(100,000) |
(100,000) |
|
Increase in Retained Earnings |
490,000 |
440,000 |
|
Retained Earnings, Dec. 31 |
4,194,000 |
3,704,000 |
Comparative Income Statement
For the years ended December 31, 20Y2 and 20Y1
|
|
20Y2 |
20Y1 |
|
Sales |
10,850,000 |
10,000,000 |
|
Cost of goods sold |
(6,000,000) |
(5,450,000) |
|
Gross Profit |
4,850,000 |
4,550,000 |
|
Selling Expenses |
(2,170,000) |
(2,000,000) |
|
Administrative Expenses |
(1,627,500) |
(1,500,000) |
|
Total Operating Expenses |
(3,797,500) |
(3,500,000) |
|
Operating Income |
1,052,500 |
1,050,000 |
|
Other Revenue and expense |
|
|
|
Other Revenue |
99,500 |
20,000 |
|
Other Expense (interest) |
(132,000) |
(120,000) |
|
Income before income tax expense |
1,020,000 |
950,000 |
|
Income Tax Expense |
(420,000) |
(400,000) |
|
Net Income |
600,000 |
550,000 |
Comparative Balance Sheet
December 31, 20Y2 and 20Y1
|
|
20Y2 |
20Y1 |
|
Assets |
|
|
|
Current Assets: |
|
|
|
Cash |
1,050,000 |
950,000 |
|
Marketable Securities |
301,000 |
420,000 |
|
Accounts Receivable (net) |
585,000 |
500,000 |
|
Inventories |
420,000 |
380,000 |
|
Prepaid Expenses |
108,000 |
20,000 |
|
Total Current assets |
2,464,000 |
2,270,000 |
|
Long-Term Investments |
800,000 |
800,000 |
|
Property, Plant, and Equipment (net) |
5,760,000 |
5,184,000 |
|
Total Assets |
9,024,000 |
8,254,000 |
|
Liabilities |
|
|
|
Current Liabilities |
880,000 |
800,000 |
|
Long-Term Liabilities: |
|
|
|
Mortgage note payable, 6% |
200,000 |
0 |
|
Bonds payable, 4% |
3,000,000 |
3,000,000 |
|
Total Long-term liabilities |
3,200,000 |
3,000,000 |
|
Total Liabilities |
4,080,000 |
3,800,000 |
|
|
|
|
|
Preferred 4% stock, $5 par |
250,000 |
250,000 |
|
Common stock, $5 par |
500,000 |
500,000 |
|
Retained earnings |
4,194,000 |
3,704,000 |
|
Total stockholders’ equity |
4,944,000 |
4,454,000 |
|
Total Liabilities and stockholders’ equity |
9,024,000 |
8,254,000 |
Instructions
Determine the following measures for 20Y2. Round to one decimal place, including percentages, except for per-share amounts, which should be rounded to the nearest cent.
Working capital Current ratio - Quick ratio
- Accounts receivable turnover
- Number of days’ sales in receivables
- Inventory turnover
- Number of days’ sales in inventory
- Ratio of fixed assets to long-term liabilities
- Ratio of liabilities to stockholders’ equity
- Times interest earned
- Asset turnover
- Return on total assets
- Return on stockholders’ equity
- Return on common stockholders’ equity
- Earnings per share on common stock
- Price-earnings ratio
- Dividends per share of common stock
- Dividend yield
| 1. Working Capital: | $1,584,000 | ||
| 2. Current ratio | 2.8 | ||
| 3. Quick ratio | 2.2 | ||
| 4. Accounts receivable turnover | 20.0 | ||
| 5. Number of days' sales in receivables | 18.3 | ||
| 6. Inventory turnover | 15.0 | ||
| 7. Number of days' sales in inventory | 24.3 | ||
| 8. Ratio of fixed assets to long-term liabilities | 1.8 | ||
| 9. Ratio of liabilities to stockholders' equity | 0.8 | ||
| 10. Times interest earned | |||
| 11. Asset Turnover | |||
| 12. Return on total assets | 8.5 | % | |
| 13. Return on stockholders' equity | 12.8 | % | |
| 14. Return on common stockholders' equity | 13.3 | % | |
| 15. Earnings per share on common stock | 5.9 | ||
| 16. Price-earnings ratio | 14.0 | ||
| 17. Dividends per share of common stock | 1.0 | ||
| 18. Dividend yield | 1.2 | % | |
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